QUESTION: Mr. Armstrong; One of the criticisms of you is that you support the idea of a central bank. Your view that Andrew Jackson destroyed the central bank and caused a depression and sovereign debt defaults appears to be a different view than what is talked about in the gold community. Could you explain your position on this point?
Your’s Truly
Confused Goldbug
ANSWER: As always, people latch onto a single fact and then apply it out of context to everything. ALL banking prior to the Civil War was a bank that issued its own “receipts” for deposits and these receipts eventually circulated as money. This goes back to the first “paper” money system so to speak that emerged in ancient Egypt and lasted for more than 2,000 years. This same system was the established way before federal backing and money took place right through Virginia Tobacco money to the paper money issued by the Bank of the United States (see illustration). Jackson destroyed the Bank of the United States because he did not like the power of any bank and in that respect was rather Marxist in he views.
Jackson had personal banking problems regarding credit so his actions seem to be rather personal and quite frankly brain-dead. He destroyed the Bank of the United States and then shifted the deposits of the Federal government to state banks. My bet is there was favoritism in that decision if not kick-backs. This lent tremendous credibility to local banks and what began was the age of Wildcat Banking thanks to the irresponsibility of Jackson.
Here is a good example of what Jackson unleashed. The currency issued by Oxford County Bank of Fryeburg, Maine, was actually issued by speculators who then sold them wholesale at deep discounts in New York City. A fraud market emerged because there were countless banks all issuing money (receipts) based upon pretend deposits without a central bank regulating anything. This is the classic example of Wildcat Banks that were created thanks to Andrew Jackson’s personal vendetta against the Bank of the United States. Oxford County Bank was chartered in 1836, but never actually entered the banking business. There was no bank taking deposits or lending money. They only issued currency against deposits that never existed. These notes are very common confirming that this type of fraud was successful and quite common. There were numerous Wildcat Banks and there was no way for people to confirm any bank’s notes were worth anything following the antics of Andrew Jackson.
Jackson unleashed a massive financial crisis. As state banks then failed, some states like Louisiana issued bonds to bail out the banks. However, the fictional money was far too vast and many states went into default on their bonds – even permanently. So we have the same reaction of government trying to bail out banks and in turn they themselves go bust. Those who support Jackson because they hate banks, also fail to notice history.
During this period, the United States did not issue $10 gold coin between 1804 and 1838. The $20 and $1 gold coins did not begin until 1849 with the California Gold Rush. The government minted a $2.5 gold coin in 1796 and stopped in 1808 restarting again in 1821. The $3 gold coins began in 1854 and the famous $4 gold coins were just patterns. The $5 gold coin began in 1796 and was continuous for the most part.
Even the silver dollar ended with the rare issue of 1804 and did not reappear until effectively 1840 because of the crisis created by Jackson with the Wildcat Banking failures. There was a shortage of coins and this was filled by private banknotes.
My problem is NOT with the Federal Reserve. You need a single bank – not countless unregulated chaos. The problem today is simply the money center banks became greedy, conspired to repeal Glass-Steagall under Clinton, and they wanted to effectively trade with other people’s money. If they want to be a hedge fund – enter the field. But what they want is to trade with other people’s money, keep all profits for themselves, and when there is a loss, hand it to the taxpayer claiming the government cannot borrow without them.
If you want to yell and scream about the Fed, what is your solution? Do the same stupid thing that Jackson did? You also better understand the system. INFLATION is not properly defined as an increase in money supply. Follow that absurd definition and you relieve Congress of all responsibility and focus only on the Fed. But inflation is not simply money supply defined and currency in circulation be it even electronic. Congress has the fiscal side of the equation and they issue the REAL money by creating bonds that have become the reserves of all banks. The Fed does not control that. So stop the nonsense. You better start understanding the system as a whole or you will create the same nightmare as Andrew Jackson. You really want countless banks with no regulation or central clearing facility? Those who are for this wildcat era because they are like Jackson and personally hate banks, will only hand them more power and total insanity. Deal with the system directly – both sides – Fiscal & Monetary if you want to fix anything for real! Otherwise, you will unleash the dark forces that will totally destroy your future.
